Rhode Island’s wealthiest residents will soon face higher state income taxes after Governor Dan McKee signed the state’s record $15.2 billion fiscal year 2027 budget into law.
Included in the budget is a new Rhode Island millionaire tax on income exceeding $1 million per year. The measure will gradually increase Rhode Island’s top income tax rate from 5.99% to 8.99% over the next three years. State officials estimate the change could generate approximately $142 million in additional annual revenue once fully implemented.
Supporters say the additional revenue will help Rhode Island fund public services and address future budget challenges without placing a greater burden on most taxpayers. Governor McKee has also pointed to concerns about reductions in federal funding as a reason for seeking additional state revenue.
Opponents, including business organizations, argue the tax could make Rhode Island less competitive and potentially encourage some high-income residents to relocate. Critics note that because Rhode Island is the nation’s smallest state, even a small number of wealthy taxpayers leaving could have a noticeable impact on state revenues.
Rhode Island now joins several states that have recently adopted similar taxes on high-income earners, including Hawaii, Maine, Massachusetts, and Washington. Supporters of the policy have pointed to Massachusetts, where a voter-approved millionaire tax has generated billions of dollars since taking effect in 2023.
The new tax is expected to begin phasing in next year as part of the state’s record budget.
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